A bond-rating agency voted Monday to keep DeKalb County's debt rating stable, a move that county leaders greeted as good news in light of ongoing economic woes.
Most important to officials, the decision by Moody's Investors Service to keep the $434 million of general obligation bond at Aa3 wasn’t a downgrade. That means the county won’t see an increase on its borrowing costs, at least in the short term.
“By not downgrading us, we’re saving millions of dollars,” said Commissioner Lee May, who heads the County Commission's budget committee. “It’s understandable that they’re wanting to see if we do what we’ve said we’re going to do.”
DeKalb ended 2010 with no money in its reserves. Concern over the county’s budget deficits prompted Moody’s to downgrade the county’s bond rating in December. Standard and Poor’s twice downgraded its rating for DeKalb since then over the same concerns.
Commissioners cut $23 million in spending this year, but the reductions couldn’t balance the budget in the face of a 13 percent drop in property values countywide.
The board voted last month to raise the tax rate 26 percent, both to plug a $37 million hole in the budget from the tax digest and also to restore the county’s reserves.
“Moody's believes that additional revenue generated by the recent tax rate increase, in addition to nearly $130 million in expenditure cuts that occurred over the last three fiscal years, will result in sound cash balances by year end,” the agency analyst wrote about DeKalb.
At least, that is the plan. Moody’s continues to view the county’s financial outlook as negative as the agency waits to see if the year ends on Dec. 31 with the $17 million to $22 million in reserves.
“They are looking to see what the results really are, but they are acknowledging what has been done,” said county finance director Joel Gottlieb.
Moody’s also calls for the county to set up “formal cash management practices and operating policies” to get its financial house in order. Among the changes: DeKalb should no longer shift money among various accounts through the year to keep the general fund in the black.
DeKalb is responding by issuing its first tax-anticipation notes, a short-term debt, since 2000 later this month. Borrowing $150 million, and paying it back with property tax revenue by year end, will solve the problem of shifting money.
Moody’s rewarded the change Monday by giving the county its highest rating, MIG 1, on that borrowing.
“Our next step will be to show we are capable of making the necessary adjustments to look forward to an upgrade,” said Chief Executive Burrell Ellis. “For a local government, to maintain your rating in this climate is outstanding.”
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